How To Evaluate Property Taxes

System Overview:

Property taxes In Madison County Alabama are calculated using mills. Each area has its own millage rate (Huntsville is 58, Madison city is 57.5, rural areas 36.5, etc) so Huntsville’s 58 mills is really just $5.80 of taxes per $100 of assessed (not appraised!) value. Investors (local or out of state) will pay full property taxes. If you homestead (occupy a residence you own) you can get an exemption. If you look up the tax data online (public info) for any property you can see what that particular property has been charged in property taxes for multiple years (usually 5-7 years) and what the current year is. There is a box on the sheet that says exemption; if it is blank then you are seeing the full amount, if there is a code (H1, H2, etc) then there is some kind of exemption discounting the amount so it will be less than you should expect to pay as an investor. Here is the country website and on it there is a full list of the different millage rates, classifications, an example, etc.

Now that’s a lot to take in a single paragraph so let’s explore some examples below to see how it all works.

Getting the information:

Go to https://dreamaps.com/?site=madisoncoal&accesslevel=public to access the public records and if you accept their disclaimer you can get that box out of the way easy enough. It basically says that it’s on you and they do not guarantee it will be error free (It’s definitely not, I’ve found errors before) or that they guarantee a bunch of technical stuff about hosting and constantly being available.

2. Now that we are in we will want to change the search method to address most likely, so use the drop-down menu at the top left and switch from owner to property address. In the box next to the drop-down you can type in the address you are analyzing. Then click the binoculars next to the address to run the search. The more specific you are the less results you will get.

3. A new box will open up with your results. If there are lots of results you can try to be more specific or scroll through the list; if there are no results try being less specific, sometimes road or street will get this because they listed it as rd or st, respectively. When we identify the property we are interested in (For this example I have selected a random house that is on the market with the keyword ‘investor,’ it’s on Penny St) we are going to go to the far left of the address and under the action column click on the blue button icon.

4. This will again open a new box, called the Mini-Property Card. The general tab should give you current appraised value. This is the number you need for your formula. It is important to not skip down to the number they give for the assessed value because, while it could be what you will get, it might be a number calculated off an exemption. In our example, we can take the appraised value of 45K*20%=9k for assessed value. 9K*.058(address is Huntsville for millage rate)=$522.00 for annual property taxes. And there you have it, annual property taxes. But there’s more! From here the remaining steps will help us double check our work and take a view of past trends.

5. On the same box let’s move over to the External Links tab and then click on the 4th link down called Assessment and Collection History. This will open a whole new browser tab or window.

6. This first window will give current year info and hopefully the appraised value here matches the number we saw on the general tab above in step 4. But let’s go ahead and scroll down to the bottom and click on the View Collection Record link.

7. Another new window or browser tab will open and here we can see if there are any exemption codes being applied (if not then our numbers should match up, unless the appraised value was updated in one place and not another). We will also get to see the collection history for multiple years, here we see the last 8 collections plus this year’s pending number. With this particular property we will notice that it jumped almost $15 from 2010-11 but after that is has remained almost flat; we could reasonable speculate that we will not see giant hikes in the future and that it will remain close to where it is for now and might trend up or down in small chunks depending on future appraisals. However, it’s the government and they can do whatever they want so DON’T count on this future judgement like a scientific fact.

And there you have it. You can run a fairly accurate number to plug into your formula to evaluate any property that has peaked your interest in Madison County. You can also look at the tax history to see if there are any noticeable trends for cost going up or down over time.

Where things go wrong:

Skipping to the assessed value on the general tab instead of the appraised value:

In the example above the assessed value on the general tab turned out to be our number; here is why we should not count on that. If we use the property above our example unit on the first list (in step 3, the unit on Pinedale) we have an assessed value of $6840 *.058=$396.72 but this is doubly wrong.

For our first error, when we fact check by going to the collections history (pic 9) we will see $348.72 and we might think ‘yay!’ even cheaper. Really this is different because homestead exemption formulas are different; this one would have been assessed value X .058 -$48 (I cannot account for determining this $48 other than the country says the exemption is usually around $45 and I just backtracked it in the math after the fact). Still if you think this error makes your numbers conservative by being higher you will be sorely disappointed when the bill comes because of the more important number skipped in the full formula.

Our second and larger error occurs during the first part, where we develop the assessed value in the first place. The first part in the formula is the appraised value X the class; the key difference is homesteaders are a totally different class at 10%! Therefore, appraised value of 68,300*20%=13,660*.058=$792.28 for the investor’s annual property tax; not so conservative anymore! Also note the Total Tax column under the Tax History is worthless to us. However, all we need to do is go over to the Appraised value history and run our formula to see what an investor would have paid during this 9-year period. We see the lowest appraised value at 67,400 and the highest at 68,500. Running the formula we get a range of taxes owed from $781.84-794.60 respectively.

In pic 9 you can see the exemption code, here it is H1, if there is anything but blank space here it will not act as a reference to fact check your number as an investor. This is always a good place to look just to double check and remind yourself to use the full formula. The exemption code, being on the collections history page, can be navigated to by following all the same steps (1-7) from our first unit example, just lookup whichever unit you are interested in.